Why do Stock Tank every third week of the month?

Why do Stock Tank every third week of the month?

There is a reason for this weeks drop and several hedge funds are
making hundreds of millions of it. This week is options expiration
week for Junes options. Last week there was tons of selling of BAC and
C calls that were in the money. It was all a set-up for the novice
investors. Her is how it works. Last week was mostly a positive week
for banks, especially for BAC who got 8 upgrades in three days. The
stocks were rolling and so were the call options for those stocks.
Many retail investors thought the upwards movement was going to
continue into this week and every indications were positive for this
week being an up week. Here is were hedgies came in. They sold tons of
calls that were in the money. To make it easier to understand I will
give you a very simple explanation:

Lets say friday BAC was selling at $13.50 in the afternoon. The $12
june calls were in the money and were selling at $1.50 (i'm not taking
into account time value of options or that one options contract
represents one hundred shares in the underlying stock.) So you have
$10K and think BAC is going to $16 by next friday (which most on the
BAC message board thought). You can buy a little over 700 shares on
the open market and make $1750 if BAC hits $16. Or you can buy $10K
worth of $12 calls for $1.50 each. And if the share price reaches $16
by next friday, you make around $17000 in profit. So if you are
certain BAC is going to $16 and every indication shows you that it is,
why not risk it and make the big hit. These Hedge funds sold those
calls last week like there was no tomorrow. Come monday, they started
to short the hell out of those BAC shares, selling 1 mil blocks at
market. They drove the share price from 13.80 to almost $12. If they
keep it down by friday, option expires worthless and they get to keep
your cash, then slowely cover over the next two weeks. This strategy
is especially effective in the summer time, when the volume is low. It
is easier to manipulate a stock with low volume.
This strategy was used for C and other financial institutions as well.
Savy investors know what's coming during options week and usually cash
out on Friday before it begins, then they pick up the bargains during
the week. You can check the history of every options expirations week,
90% of those weeks end in the red.

So don't worry if you took a lose this week, you will make it back in
the next one.

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